CHAD Therapeutics Second Quarter Net Earnings Tripled On 19% Revenue Gain
Net Earnings For The First Half Increased 92%
CHATSWORTH, California,November 4, 2004 . . .CHAD Therapeutics, Inc. (ASE:CTU) announced today that net earnings for the second quarter of fiscal 2005 tripled versus the same period last year on a 19% increase in net sales. For the first six months of fiscal 2005, net earnings increased 92% compared to the same period of fiscal 2004.
For the three months ended September 30, 2004, revenue increased 19% to $6,309,000, an eight-year high, from $5,284,000 for last year’s second quarter. Net earnings increased 203% to $455,000, or $0.04 per diluted share, from $150,000, or $0.02 per diluted share, a year earlier.
For the first six months of fiscal 2005, revenue increased 13% to $12,408,000 from $10,953,000 for the first six months of fiscal 2004. Net earnings increased 92% to $717,000, or $0.07 per diluted share, from $374,000, or $0.04 per diluted share, for the first half of fiscal 2004.
At September 30, 2004, CHAD had no long-term debt and cash of $3,007,000, or 21% of total assets. At March 31, 2004, cash was $2,708,000.
Operations Review
Earl L. Yager, Chief Executive Officer and President, said that domestic sales for the second quarter grew 15% as CHAD began shipping significant numbers of its new SAGE Therapeutic Device in September. “Introduced earlier this year, our new SAGE device employs our proprietary technologies to sense an oxygen patient’s movements and automatically adjust the rate of oxygen delivery to reduce the risk of oxygen desaturation as activity increases. The SAGE device, along with CHAD’s OXYMATIC® 400 Series electronic conservers and CYPRESS OXYPneumatic® conservers, provide the industry’s widest range of cost-effective choices for homecare providers to satisfy individual patient requirements and preferences for ambulatory oxygen products.”
Yager continued, “We also introduced our new LOTUS electronic oxygen conserver at the 25th annual Medtrade show for the home health care industry held in Orlando in October. Earlier, we announced the receipt of FDA clearance to market this sleek and lightweight addition to our electronic conserver line. It contains several enhancements to our popular OXYMATIC 400 series conservers and will be offered with or without a breath sensing alarm. The LOTUS conservers are powered by two AA-size batteries that will provide up to four months of normal usage and an optional rechargeable battery pack will also be available for these devices.”
Outlook for Growth
Yager added, “The introduction of the LOTUS conserver represents another step in the enhancement of our oxygen conserving and therapeutic device product lines, which is an important element of our strategic growth plan. Our success in this area is creating the resources to pursue the other elements of our growth plan — to expand usage of the TOTAL O2® Delivery System and continue work on the products we are developing for the sleep disorder and related markets.
(more)
CHAD, OXYMATIC, OXYMIZER, OXYLITE, and TOTAL O2 are Registered Trademarks of Chad Therapeutics, Inc. ISO 9001 Certified Company WWW.CHADTHERAPEUTICS.COM
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CHAD Therapeutics Reports Higher Revenue and Net Earnings For The Second Quarter and First Half of Fiscal 2005 November 4, 2004 Page Two
“We continue to make progress with the initial products we are developing for the sleep disorder market, and are currently evaluating alternative distribution models for these new products. We have developed engineering prototypes for several devices and are pleased with the results of preliminary testing we have done on these devices. Our next steps will be to make a decision on distribution and clinical testing that will likely begin after the first of the year. We will provide more information on our progress as it becomes available.”
Management Reiterates Guidance
Yager concluded, “Based on these factors, and assuming that current sales and expense trends continue, we continue to believe CHAD will generate net earnings of between $2,500,000 and $2,700,000, or $0.24 to $0.26 per diluted share, for the fiscal year ending March 31, 2005.” For fiscal 2004, CHAD reported net earnings of $1,001,000, or $0.10 per diluted share.
Operating Loss Carryforwards
At September 30, 2004, the company had fully utilized its net operating loss carrybacks and Federal net operating loss carryforwards and had approximately $2,013,000 in California net operating loss carryforwards available to offset future taxable income. The Company also has approximately $793,000 in net deferred tax assets, upon which a valuation allowance has been placed, that will be available to offset future income tax expense. In September of 2002, the State of California enacted legislation that suspended the utilization of net operating loss carryforwards during tax years starting in 2002 and 2003 effective retroactively to January 1, 2002. As a result, CHAD has been unable to use its California net operating loss carry forwards until the tax year that began April 1, 2004.
Conference Call
Chad has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast will be available from theInvestor Relations link atwww.CHADtherapeutics.com. A replay will be available after 1:00 p.m. ET at this same Internet address. For a telephone replay, dial (800) 633-8284, reservation #21211115 after 1:00 p.m. ET.
About CHAD Therapeutics
CHAD Therapeutics, Inc. is in the business of developing, producing and marketing respiratory care devices designed to improve the efficiency of oxygen delivery systems for home health care and hospital treatment of patients suffering from pulmonary diseases. For more information, visitwww.CHADtherapeutics.com.
Safe Harbor Statements under the Private Securities Litigation Reform Act of 1995.
The foregoing statements regarding prospects for future earnings and revenues, future sales trends and the introduction of products under development are forward-looking statements that involve certain risks and uncertainties. A number of important factors could cause actual results to differ materially from those contemplated by such forward-looking statements. These include the loss of one or more major customers, unexpected difficulties encountered in ramping up our manufacturing capabilities to meet increased customer demand, increased competition, the introduction of new products with perceived competitive advantages over the Company’s products, changes or proposed changes in health care reimbursement which affect home care providers and CHAD’s ability to anticipate and respond to technological and economic changes in the home oxygen market. Moreover, the success of the Company’s products and products under development will depend on their efficacy, reliability and the health care community’s perception of the products’ capabilities and benefits, the degree of acceptance the products achieve among homecare providers and, with respect to products under development, obtaining timely regulatory approval. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in the Company’s annual and quarterly reports filed with the Securities and Exchange Commission under the caption “Outlook: Issues and Risks.”
(tables attached)
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CHAD THERAPEUTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
Three Months Ended
September 30,
September 30,
2004
2003
2004
2003
Net sales
$
12,408,000
$
10,953,000
$
6,309,000
$
5,284,000
Cost of sales
7,375,000
6,591,000
3,696,000
3,190,000
Gross profit
5,033,000
4,362,000
2,613,000
2,094,000
Costs and expenses:
Selling, general and administrative
3,448,000
3,311,000
1,712,000
1,596,000
Research and development
827,000
668,000
417,000
345,000
Total costs and expenses
4,275,000
3,979,000
2,129,000
1,941,000
Operating income
758,000
383,000
484,000
153,000
Other income, net
14,000
9,000
6,000
4,000
Earnings before income taxes
772,000
392,000
490,000
157,000
Income tax expense
55,000
18,000
35,000
7,000
Net earnings
$
717,000
$
374,000
$
455,000
$
150,000
Earnings per share:
Basic
$
0.07
$
0.04
$
0.04
$
0.02
Diluted
$
0.07
$
0.04
$
0.04
$
0.04
Weighted shares outstanding:
Basic
10,116,000
10,076,000
10,122,000
10,076,000
Diluted
10,609,000
10,297,000
10,598,000
10,313,000
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CHAD THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30,
2004
2003
Assets
Current assets:
Cash
$
3,007,000
$
1,083,000
Accounts receivable, net
3,458,000
2,760,000
Income taxes refundable
—
4,000
Inventories, net
5,362,000
5,994,000
Prepaid expenses
382,000
428,000
Deferred income taxes
434,000
—
Total current assets
12,643,000
10,269,000
Property, plant and equipment, net
1,132,000
1,153,000
Other assets, net
764,000
643,000
Total Assets
$
14,539,000
$
12,065,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
1,252,000
$
597,000
Accrued expenses
1,151,000
976,000
Income taxes payable
228,000
16,000
Total current liabilities
2,631,000
1,589,000
Shareholders’ equity:
Common shares, no par value, authorized 40,000,000 shares, 10,122,000 and 10,078,000 issued and outstanding
13,347,000
13,259,000
Retained earnings (accumulated deficit)
(1,439,000
)
(2,783,000
)
Net shareholders’ equity
11,908,000
10,476,000
Total Liabilities and Shareholders’ Equity
$
14,539,000
$
12,065,000
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